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IPE Awards: 130/30 craze is "overplayed"

GLOBAL - The hype around long-short investment products, such as 130/30 strategies, is very much overplayed, delegates at the annual IPE Awards in Vienna were told.

In a discussion panel about pension issues, investment professionals from various countries concluded  these products are surrounded by a certain level of hype in any case.

Andrew Marks, director of business development for EMEA southern region at T Rowe Prive, told delegates at the IPE Awards Seminar in Vienna last week, the strategy could be valid, as a tool, but argued its usefulness depends on manager skill.

"I think it is a nice idea, but the marketing hype is very much overplayed," added Marks.

Jean-Francois Schock, senior managing director for strategic growth EMEA with State Street Global Advisors, also suggested there was an element of hype to the relatively-new concept, though he tbelieves it is mostly a valuable strategy.

"In the global sense, I think this is really more optimising portfolio construction, rather than a brand new idea," he said.

Schock notes long-short is an old idea, given long-short equity funds have in existence for almost 20 years.

"Excess returns are reached by manager skill, but also by breadth of opportunities, and I think by lifting the long-only constraint, you can possibly broaden your opportunity set and hence outperform,"  said Schock.

He added: "If there is a stock you don't like in the long-only context, the only thing you can do is not own it. And that is why we believe by allowing controlled shorting you can broaden your opportunities."

Marks warned, however, if a pension fund does not have the manager skill for long-short strategies, they should go long-only.

Christian Benigni, a partner at First Avenue Partners, told delegates there is a regulatory change in the pension industry which has been feeding the hype.

Benigni is adamant everyone should have a look at these strategies, though he concedes it is more difficult to implement 130/30 than it was previously thought.

"Most of the 130/30 products I know have not necessarily been skill-based investing, but quant-based investing; that doesn't mean that quant isn't a skill, but it is probably not the skill we are talking about when it comes to stock picking," he said.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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